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Intra-regional FDI and Economic Integration in South Asia

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  • Prema-chandra Athukorala

Abstract

This article examines trends and patterns of intra-regional foreign direct investment (FDI) in South Asia, with a focus on the potential for integrating production processes among countries in the region through further trade and investment policy reforms. The empirical evidence pieced together from scattered sources suggests that horizontal (market seeking) FDI has continued to dominate South Asian intra-regional FDI, with a significant shift in recent years in favour of services sector activities. Vertical (efficiency seeking) FDI in the region has remained confined to a few product lines, predominately garments, and also a few industries in which the availability of specific natural resources plays an important role in the site selection decisions of firms. In other industries, including electronics and electrical goods in which global production sharing is heavily concentrated, there is no evidence of notable cross-border operations by regional firms.

Suggested Citation

  • Prema-chandra Athukorala, 2014. "Intra-regional FDI and Economic Integration in South Asia," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(1), pages 1-35, March.
    • Handle: RePEc:sae:soueco:v:15:y:2014:i:1:p:1-35
    DOI: 10.1177/1391561414525710
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    References listed on IDEAS

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    Cited by:

    1. Prema-chandra Athukorala & Dayaratna Silva, 2019. "The FTA debate in Sri Lanka: Rhetoric and Reality," ASARC Working Papers 2019-03, The Australian National University, Australia South Asia Research Centre.
    2. Adam Marszk, 2014. "Economic Integration and Foreign Direct Investment: Review of Main Theoretical Concepts," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 2(3), pages 79-89.

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    More about this item

    Keywords

    FDI; South Asia; economic integration; trade; investment;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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